Pakistan’s local gas reserve to end in 2030, dark future awaits nation
January 28, 2011
Pakistan currently facing acute power shortage will have to suffer a lot in next 20 years due to the gradual decline of gas output from its major 7 gas fields. The output from largest gas fields is projected to be zero in year 2029-30. Steps are needed to prevent the country from darkness in near future.
The seven existing large fields (Sui, Qadirpur, Zamzama, Sawan,Bhit,Badin and Miano) represent 65 percent of the total gas production and will start declining during the medium term, 2013. The decline will accelerate during the long term, 2019 and the remaining production from these fields will be limited to only 564 million cubic feet per day MMcfd by 2020.
The independent system fields, Mari, Uch and Kandhkot, are also expected to decline from current 1013MMfcd to 1009MMfcd in 2019-20 and only 450MMfcd in year 2029-30, the only output Pakistan will have from its local sources unless steps are taken to discover new fields.
The gas output is also expected from fields such as Kunar Pasakhi, Makori, Sui deep and other fields but are projected to produce 869 MMfcd during current fiscal year and will gradually reduce to 705 MMfcd by 2019-20 and there will be no output in year 2029-30. The country’s exploration and production efforts require strong and persistent efforts to maintain a production “plateau” of between 4,000 and 5,000 MMcfd.
In order to stop the decline and tap additional reserves to increase current gas production, Asian Development Bank has recommended the recommended that the government provide price incentives for infill drilling and tight gas production.
The Asian lender has suggested that Oil and Gas Regulatory Authority OGRA should rationalize and restructure gas tariffs to recover supply and distribution costs, including imported energy to meet gas deficits, and to minimize cross subsidies across various sectors to enhance economic growth. The government should implement measures to reduce UFG, unaccounted for gas,as current levels are in the high range of 7 percent to 9 percent. One percentage point of UFG means a loss of Rs3.5 billion/year at the current average gas price. Litigation cases should be settled that could unblock the production of several hundred MMcfd of pending gas.
The indexation of the gas price with reference crude oil price should be improved for additional gas in the upstream gas sector.
The Government should establish a ministry of energy combining functions now divided between Ministry of Water and Power MWP and the Ministry of Petroleum and Natural Resources MPNR. “This will create a single entity for integrated energy policy and planning with administrative oversight over public enterprises. The main goal of the combined ministry would be to steer the development and implementation of integrated policies, strategies, and plans for the energy sector based on good governance and operational efficiency”, says ADB.
The ADB also proposes the merger of National Electric Power Regulatory Authority NEPRA and Oil and Gas Regulatory Authority OGRA into one national energy regulatory authority. An integrated energy sector regulator will send consistent signals to company operators and potential investors, will overcome the issue of insufficient professional capacity, and will strengthen the authority's opposition to political interference.
The Asian Bank has also called to develop a comprehensive energy policy covering all elements of the energy supply chain including power, oil and gas, energy efficiency, renewable energy, and cross links between energy sector fuels. The policy should provide uniform rules and incentives, visibility, and a level playing field to promote private sector investments. “The policy should reflect economic pricing of energy and a phasing out of untargeted subsidies”, the Asian lender noted.
Pricing energy products on a full-cost-recovery basis is necessary to re-establish the financial sustainability of the energy sector, to revitalize progress towards a liberalized energy sector, to foster private sector investments in the development and production of indigenous resources such as gas, coal, conventional power plants, hydropower, renewable and alternative energy resources. Therefore, eliminating untargeted energy subsidies, in particular tariff differential subsidy TDS, needs to be a central plank of the government's strategy. This will also promote energy efficiency and environmental considerations.